Trump vs. the Fed: Who rescues the stock market first?

Forget saved by the bell. Investors are hoping to be saved by a tweet.?

Markets have had a hard time determining how to price tariffs in the opening weeks of President Trump’s second term. The commander-in-chief’s social media posts are as likely to move asset prices as cold economic data, and his media-savvy cabinet members make plenty of news themselves.??

US tariffs against Canada, Mexico, and China took effect Tuesday, and traders scrambled to position for a trade war. All three US benchmark indexes closed the day in the red, but then, like a scene in a play, Commerce Secretary Howard Lutnick appeared on Fox Business and said a deal was imminent.?

“Both the Mexicans and the Canadians are on the phone with me all day today, trying to show that they’ll do better,” Lutnick said, speaking stock futures higher after hours.?

As of Tuesday, the S&P 500 has wiped out all its post-election gains, and it hovers in negative territory for 2025.

“The initial animal spirits of Trump 2.0 have been trumped by the uncertainty unleashed by Trump Turmoil 2.0,” wrote strategists at Yardeni Research in a note early Wednesday. “The whirlwind of tariffs imposed on America’s major trading partners, federal job cuts implemented by the DOGE Boys, and the upending of the world order have been head spinning.”

Trump vs. the Fed

Under Biden, markets relied on the “Fed put” — the belief that the central bank would cut rates in the event of a stock market correction. Now, speculation is shifting toward a “Trump put” as traders wonder if the president will intervene to stabilize stocks.?

Considering the president treats the S&P 500 like a scoreboard, those expectations will likely gain momentum if stocks keep dropping. He does have a history of responding to sell-offs, after all.

While Trump hasn’t given much indication he’ll provide a backstop, he could do so with a single tweet.?

But if the White House doesn’t budge on tariffs, markets may cozy back up to Jerome Powell for the Fed put. Over recent weeks, traders have raised their bets to three rate cuts from two for 2025, largely on the assumption that the central bank will prioritize economic growth over inflation.?

The longer tariffs remain in play, the more pressure — justified or not — Powell will feel to alleviate recession fears.

To be clear, it was only a couple weeks ago the S&P 500 hit a record high.

But traders have short memories. The last two trading days were jarring enough to leave them looking for reassurance.?

That places markets in an unusual guessing game:?

1. If Trump removes tariffs first, stocks could bounce back on optimism for trade deals
2. If Powell cuts rates first, investors could cheer lowering borrowing costs
3. If neither moves quickly, stocks will need to find other reasons to climb??

Now, there is a case for the White House and the Fed to both hold back from rescuing the stock market.?

Doing so, you might argue, elevates the short-term over the long-term. Trump himself has acknowledged that his policies could cause near-term economic uncertainty.?

That would leave the bull market in its most precarious position yet — stuck between an administration willing to tolerate pain and a Fed juggling conflicting priorities. ?

Like this shortened edition? Sign up free to get the full version of Opening Bell Daily in your inbox each morning.